The banks to avoid when you are seeking loans

Editors note:

This version corrects errors on an earlier story, which were attributable to Central Bank of Kenya who authored the data but later changed to new rates after lenders’ complaints. You can find all the bank’s correct loan pricing as at 31 March, 2015 at www.centralbank.go.ke.

Also note that in Kenya, there are two different and separate entities by the names Habib Bank AG Zurich and Habib Bank Ltd. The content in this article refers to Habib Bank Ltd.

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For the longest, banks in Kenya have been fleecing borrowers with little or no information on how expensive or cheap the money they are borrowing is.

This has, however, changed with the introduction of annual percentage rate (APR) and a standard pricing mechanism Kenya Banks Reference Rate (KBRR). APR combines all charges levied to secure a loan, negotiation fees, monthly charges, interest, commission and insurance to a single comparable rate making it possible to compare rates from the banks.

According to the Central Bank, the KBRR would be the uniform base lending rate across the banking sector and would enable consumers compare the pricing of loans at various lenders.

KBRR was set at 9.13 per cent but has since fallen to 8.54 per cent. There is expectation is that this rate could change in today’s Monetary Policy Meeting as Central Bank weighs in to prop the shilling.

Money lets you know where to seek a cheap loan. Some banks are still offering credit at highly expensive rates while others are yet to shift loans to the KBRR platform.

For instance, according to a report released last week by CBK exposing the credit pricing of local lenders, Diamond Trust Bank, Faulu Microfinance Bank and SMEP Microfinance Bank were yet to convert to the KBRR loan pricing framework as of March 31, 2015.

MOST EXPENSIVE LENDERS

According to the CBK report, K-Rep Bank is the most expensive lender in Kenya. On the cheaper side, Bank of India and NIC Bank are the overall cheapest lenders.

Well, today, Money breaks down the list by CBK on credit pricing to help you spot the lenders where loans are going for an arm and a leg:

Consumer loans, micro loans, and business loans secured with property, K-Rep Bank is offering micro-loans at 27.46 per cent, and consumer loans and business loans secured with property at 24.41 per cent respectively with a maturity of between 1 and 5 years.

Trans-National Bank features prominently in the expensive category, with loans going for 26.31 per cent with a maturity of 1 to 2 years and 25.5 per cent with a maturity of over 2 years for consumer loans, and 24 per cent for micro-loans. Habib Bank Limited has priced consumer loan at 17.13 per cent and business at 17.41.

Among the microfinance institutions, U&I Microfinance Bank is selling consumer loans at 21.33 per cent while Remu Microfinance Bank is charging 20 per cent.

For micro-loans, U&I Microfinance Bank stands out again with its loans going at 22 per cent. Rafiki Micro Finance is in this boat too with micro-loans going at 21.91 per cent.

In sharp contrast, at Paramount Universal Bank, consumer loans are going at 9.5 per cent. Bank of India is charging 12.17 per cent while at African Banking Corporation, the loans are going at 12.5 per cent. Dubai bank is charging consumer loans at 12.91 per cent.

For consumer loans with a maturity period of over two years, Dubai Bank, Family Bank and National Bank are the cheapest at 12.91 per cent, 14.62 per cent and 14.71 per cent respectively.

For business loans with a maximum repayment period of five years, Standard Chartered leads the pack with 13.9 per cent for credit repayment spanning over 5 years. National Bank is charging 15.58 per cent for similar credit.

SME, asset finance loans

Equatorial Commercial Bank and First Community Bank are offering SME loans at 20.75 per cent and 20.69 per cent respectively. Small businesses are getting loans from Remu Microfinance and EcoBank Kenya at 20 per cent and 20.77 per cent respectively.

This is in contrast to the 14.63 per cent, 14.81 per cent, being offered at African Banking Corporation, and Commercial bank of Africa.

In the asset finance segment, Uwezo Microfinance is alarmingly expensive at 30.25 per cent, followed by EcoBank and Barclays Bank at 21.5 per cent and 21.41 per cent respectively. On the cheap side, Equity Bank and Trans National Bank are the fairest at 10 per cent, followed by Rafiki Microfinance at 12.64 per cent, African Banking Corporation at 13 per cent, and KCB at 13.85 per cent.

Personal residential mortgage and commercial mortgage

Rafiki Microfinance has been ranked as the most expensive at 20.41 per cent for individuals seeking mortgages. Rafiki isn’t alone in this bracket. Gulf African Bank is charging home hunters 17.74 per cent while home loans at Consolidated Bank are going at 18.41 per cent.

On the other end of the rope, NIC Bank is the cheapest at 10.95 per cent, Family Bank comes close at 12.49 per cent while Barclays Bank is charging 13.31 per cent.

For commercial mortgages, Bank of Africa is the most expensive at 18.79 per cent, followed by NIC Bank and Rafiki Microfinance at 18.41 per cent, First Community at 18.19 per cent, and Housing Finance at 18 per cent. Giro Commercial Bank is the cheapest at 15 per cent, followed by KCB at 15.46 per cent.

Overdrafts

For businesses, overdrafts are most expensive at K-Rep Bank. The bank is charging a rate of 24.41 per cent. It is closely followed by Standard Chartered Bank at 24 per cent and Jamii Bora Bank at 20.41 per cent.

Overdrafts are cheapest at Paramount Universal Bank where they are charged at 14 per cent, Commercial Bank of Africa at 14.58 per cent, Equatorial Commercial bank at 15 per cent and NIC Bank at 15.08 per cent.

The big banks

KCB: The lender is charging an interest of 16.71 per cent for its consumer (personal) loans, 18.71 per cent for business loans secured with property, 13.85 per cent for its asset finance loans, 15.71 per cent for overdrafts, 14.16 per cent for personal residential mortgage, 15.46 per cent for commercial mortgage, 18.71 per cent for SME loans, and 15.71 per cent for its corporate loans.

Equity Bank: Consumer loans at Equity Bank are being charged at 16.5 per cent, business loans at 19 per cent and 18 per cent for loan repayments of up to five years and repayments going past five years respectively. Asset finance is going for 10 per cent, SME loans at 17.5 per cent, personal mortgages at 17 per cent, and overdrafts at 19 per cent.

Standard Chartered: StanChart has set the cost of consumer loans at 19.4 per cent, with business loans guaranteed with property for a period exceeding five years selling at 13.9 per cent. Personal mortgages are going for 13.9 per cent while SME loans are being charged at a rate of 16 per cent.

Co-op Bank: Business loans secured with property are selling at 20.32 per cent, personal mortgages at 14.01 per cent and asset finance loans are going for 15.43 per cent.

Barclays Bank: Consumer loans are most expensive at Barclays Bank among the big banks. They are going for 19.86 per cent. Asset finance loans are being charged at 21.41 per cent while personal mortgages are set at 13.31 per cent.

Family Bank: Consumer loans are selling at 15 per cent for a period of less than two years and 14.62 per cent for a period of over two years. Asset financing has been placed at 16.71 per cent, personal mortgages at 12.49 per cent and SME loans at 17.76 per cent.